MBA 520 Module Two Financial Statement Analysis Worksheet
The main goal of financial statement analysis is to use past and current performance to identify changes and trends that will affect a company. Financial ratios are a widely used form of financial analysis in which the relationship between two or more line items is analyzed to evaluate a companys performance. The calculations you practice in this assignment will be applicable in completing Milestone One specifically determining recent financial performance and current financial health.
Prompt
Reference the information found in the Module TwoFinancial Statements Analysis Data PDF located in the Assignment Guidelines and Rubrics folder to complete the following.Once you have calculated the ratios asked for using the data in the PDF provide a brief summary of how the ratios are used and why they are important.Once you have completed the calculations provide a brief two- to four-sentence rationale for how these calculations can be used in analyzing the financial position of a company and why they are important. Your rationale should explain what information the ratio provides to the reader and how the reader may use that information.Use the Shapiro Library your text and the non-graded discussion forum in this module to ask questions of your peers to inform your responses to the questions below.
Before beginning this assignment you will need to download and/or print the Module TwoFinancial Statements Analysis Data PDF in order to complete the assignment.
1. (12.5 points) Calculate XYZs 2013 current and quick ratios based on the projected balance sheet and income statement data.
2. (12.5 points) Calculate the 2013 inventory turnover days sales outstanding (DSO) fixed assets turnover and total assets turnover.
3. (12.5 points) Calculate the 2013 debt-to-assets and times-interest-earned ratios.
4. (12.5 points) Calculate the 2013 operating margin profit margin basic earning power (BEP) return on assets (ROA) and return on equity (ROE).
5. (12.5 points) Calculate the 2013 price/earnings ratio and market/book ratio.
6. (12.5 points) Use the extended DuPont equation to provide a summary and overview ofXYZs financial condition as projected for 2013.
7. (12.5 points)Use the following simplified 2013 balance sheet to show in general terms how an improvement in the DSO would tend to affect the stock price.For example if the company could improve its collection procedures and thereby lower its DSO from 45.6 days to the 32-day industry average without affecting sales how would that change ripple through the financial statements (shown in thousands below) and influence the stock price?
Accounts receivable \$878 Debt \$1545
Other current assets 1802
Net fixed assets 817 Equity 1952
Total assets \$3497 Liabilities plus equity \$3497
First we need to calculate XYZs daily sales.
Daily sales= Sales / 365
Daily sales= \$7035600 / 365
Daily sales= \$19275.62
Target A/R = Daily sales Target DSO
Target A/R = \$19276 32
Target A/R = \$616820
Freed-up cash = old A/R new A/R
Freed-up cash = \$878000 \$616820
Freed-up cash = \$261180